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tv   Nightly Business Report  PBS  November 10, 2016 6:30pm-7:01pm PST

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>> announcer: this is "nightly business report" with tyler mathisen and sue herera. all-time high. the trump rally continues, sending the dow to a record, although not all sectors go along for the ride. what should you do now? trumped up after the election. mortgage rates spike. is it temporary, or the new normal in housing? and how much will you get if a trump tax plan goes through? all that and more tonight on "nightly business report" for thursday, november 10th. good evening, everyone, welcome. sue herera has the night off. call it the trump rally day two. it is early, very very early. but all the naysayers and
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prognosticators who said the trump win would send stocks down hard have been off the mark. today, the dow jones industrial average rocketed to a record close. but not everyone participated. we'll have more on that in just a moment. the dow rose 218 points to 18,807, a record. the nasdaq lost 42. and the s&p 500 rose four. bob pisani has more on the rally. >> reporter: what a week of trading. we went from rallying on monday, going into the election, to down 800 points the night of the election, to soaring to record heights just today. what's going on? there's a new trading mentality on wall street right now. let's call it the reflation trade. buy into sectors that will benefit from less regulation and more fiscal stimulus, that means spending. bank stocks like jpmorgan and goldman stacks all hit new highs
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today. on the other side, the downside, interest rate sensitive groups like telecom, real estate, and utilities are being hit on concerns of higher interest rates. big tech companies like apple and amazon are down on trade concerns. we may be approaching the limits to how far banks and pharmaceuticals, for example, can go without very specific changes in the legislation. we need to hear more on the specifics of less regulation, more stimulus, and tax reform. that may not happen until january. for "nightly business report," i'm bob pisani at the new york stock exchange. >> as bob mentioned, big name tech stocks have not participated in this post-election stock euphoria. here's more on why this notable group is sitting out the rally. >> reporter: shock waves are revery bad rating throughout silicon valley. executives are grappling with a
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new reality. eric schmidt of google acknowledged the stakes. >> the top five most valuable companies in the u.s. today are apple, google, amazon, microsoft, and facebook. what do each and every one of those companies need? high value, high quality, high levels of education immigration. every one of them is powered completely by those policies. which have been stuck for 20 years. >> reporter: but those policies may be changing as a new order takes over. one that has become increasingly hostile. never before has the tech industry been so united against a presidential candidate than it was against donald trump. trump took shots at some of the biggest names in tech. he called for a boycott on apple, claimed that ibm was moving jobs outside the u.s., and suggested that amazon was an illegal monopoly. in response, amazon's ceo jeff
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bezos offered to send trump to space. but today, he congratulated the president-elect and wished him success. in a memo to employees, apple's chief particultim cook said the company's north star hasn't changed and the only way to move forward was to move forward together. some were not as hopeful. stuart butterfield said he was heartbroken. the co-founder of hyperloop one suggested that california secede. trump's hard line stance on immigration is also at odds with the industry's push for immigration reform, another point schmidt stressed. >> we bring people into this country, we have the best education system by far, we kick them out after giving them these incredibly powerful degrees, and then we kick them out and they become competitors. >> reporter: billionaire bill
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thiel's is one of the few people in tech who will have the new president's ear. the dust hadn't settled on election night or early morning before bond yields started to rise. of course with rising yields comes rising mortgage rates. diana olick on what the spike means. >> reporter: as president-elect donald trump met with leaders in washington today, investors around the world continued to back out of the bond market, which in turn pushed u.s. mortgage rates, which loosely followed bond yields to their biggest two-day gain in three years. >> in terms of actual interest rates, we moved a quarter of a point higher in two days. that is relatively unheard of, we can count without using any of our toes, back at least a decade. >> reporter: the average rate
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for 30-year fixed mortgages are still historically low. but it could keep some buyers from qualifying for a loan. rising rates also just plain scare buyers. >> psychologically we feel like 3.875 is a much higher rate than 3.3625, if that's what we're looking at. the psychological impact is fairly substantial. >> reporter: the rise in interest rates is also hitting the stocks of those who invest in real estate. >> reits are derivative of the economy. interest rates going up with send reits down. if the economy does better, that should help rent growth. >> reporter: it really is a grand irony. donald trump rode to victory on an electorate looking for a better economy and a better standard of living. but the initial financial market
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reaction made mortgages more expensive and could push rents even higher. for "nightly business report," i'm diana olick in washington. >> can the trump stock market rally continue? and how did so many get it so wrong? the question of the week, i suppose. joining us now to discuss, david leibovitz and bryan railing from wells fargo investment institute. david, can this rally continue or is it time for a little breather here? >> so i wouldn't be surprised to see this rally take a breather. there's a still a lot of uncertainty around what president-elect trump's policies will be. stocks have been rallying on decreased regulation, that all sounds very good. the proof will be in the pudding. we need to get a better sense what his policies are going to look like in order for this
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rally to be extended. i wouldn't be surprised to see stocks, interest rates, take a breather, settle at the levels they're currently sitting at, and waiting for more information. >> bryan, let's get some thoughts on bonds. what is the bond market saying? >> well, the bond market is reacting to all the factors that are occurring in the equity markets. so when people buy equities they tend to sell bonds, in simplistic terms. also on the fiscal outlook, if we get more fiscal spending, we could see growth rates and inflation increase. that's a negative for bonds. and also on the trade policies, if we have less global trade, we'll have to buy more things here within the u.s., and that would tend to raise prices, raise inflation. inflation is not what you want to see if you're a bond holder. there's a lot of nervousness in the bond market, that's why you see the selling. but there's not a lot of specifics. i think we're close to an end to that selling as we await more
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specifics. >> sort of a code for saying you think this may be a little overdone here. a lot of people have piled into bonds. are they ready for what higher interest rates might mean to the total return on bonds and to the value of their shares or their bonds themselves? >> if you look at bonds in a portfolio context, your bonds aren't doing as well, your equities are probably doing better. they're doing what they're supposed to do, diversify. if you're thinking of buying bonds and holding them to maturity, that income stream is still good, will still get you the income that you thought, so there's no change there. but in a total return perspective, bonds alone, yes, a lot of the policies trump outlined could increase growth, increase inflation, in general that could be bad for a bond-only holder. >> david, back to you on stocks, we've seen already some of the sectors that have bend or are responding positively to the
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prospect of the trump presidency. and some that have reacted negatively. do you think that's what we're going to see going forward, certain sectors doing very well? and talk to me a little bit about technology and why it's not doing so well. >> so i think there are a couple of things going on. first, again, i wouldn't be surprised to see this rally take a bit of a pause. it's been the more cyclical names, the industrials, the financials, which have led this rally, where is utilities, telecom, consumer staples, have been lagging. that stands in sharp contrast to what we saw during the first months of the year when high dividend, low volatility names were the name of the game. do i expect the cyclical leadership to continue? as long as the information we get on what the actual policies will be is in line with expectations, yes, cyclicals could continue to outperform, and have a valuation standpoint
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they look far more attractive. on technology, technology is being pushed down, given concerns about what trade agreements may look like going forward. but what i would say the thing to keep in mind about technology is, if we think back to 2015, when we were in a moderate income growth environment, a little bit of inflation, tech names performed very well, because they have the ability to grow avenues, they have the ability to grow earnings kind of regardless of what the broader macroeconomic backdrop is, so i wouldn't dismiss the tech names out. >> david, thanks very much, bryan, thanks as well, we appreciate your insight and time. >> thanks for having me. >> thanks. what does a trump administration mean for the federal reserve? steve liesman assesses the landscape. >> reporter: the election of a new president has thrown open questions about the federal reserve, ranging from rate policy to personnel. the first hint that donald trump could surprise the world by
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being elected president sent the chance of a rate hike plunging. it's stabilized and has now come back to be 63%, just about where it was when markets thought hillary clinton would be elected. fed officials today said the election officials have not changed their view that the case for raising rates is relatively strong. almost certainly that came from a pretty positive stock market reaction to the election. another area of interest is whether the president-elect will respect the fed's independence. trump accused the fed and fed chair janet yellen of keeping rates low to help his opponent, levying harsh criticism at the central bank. >> one of the lessons from 100 years of central banking is that independent central banks tend to perform better, keep inflation low, and that's something that most countries,
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the most sufficientccessful cou have accepted. from my perspective, that's the most important thing, for the fed to continue to have the ability to make the monetary policy decisions that are best for the long run. >> reporter: trump economic adviser david malpass said this morning that the fed is independent but didn't quite stop there. >> the issue is their performance has not been good. we've had a really slow growth economy. so the question is will they look inside and see that they're part of that problem. >> reporter: president trump will be able to put a large imprint on the fed in the months and years ahead. yellen's term is up in february of 2018. two fed governorships are vacant now. that means he'll be able to appoint at least three of the governors. now that he's president, does he want higher rates, or like many who held the oval office before him, does he prefer rates as low as possible? for "nightly business report," i'm steve liesman. the lobbying of the trump
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administration has begun already. the alliance of automobile manufacturers, which represents the major car makers, sent a letter to trump's transition team, urging the president-elect to rework fuel economy standards, among other things. those fuel mandates could cost the industry billions. the transition has begun, of course. president obama and president-elect trump made face-to-face for the first time at the white house today to discuss policy and life at 1600 pennsylvania avenue. john harwood joins us from washington. john, good evening. how did the meeting go? >> reporter: it went very well. president-elect trump and president obama were cordial with one another. they said all the things that the country and the markets wanted to hear about a smooth and peaceful transition. this is just the beginning of it, of course. but they continued the spirit of what donald trump expressed on election night, what president obama expressed yesterday, and i
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think that's as much as we can hope for, especially given the fact that donald trump who is taking direct aim at core elements of president obama's legacy. >> and the transition from george w. bush to mr. obama went presumably pretty doggone well. there was another meeting today almost equally sort of propitious, i suppose, between the president-elect, the speaker mr. ryan, and the majority leader of the senate, mr. mcconnell. what do we know about those meetings? >> reporter: tyler, that's one of the unique things about this campaign, is that president-elect trump had a relationship as strained with leaders of his party, both mitch mcconnell and paul ryan, that we've seen. they kept their distance. he criticized them, especially paul ryan, called him weak and ineffective during the campaign. but now they're going to work together and try to figure out what parts of his agenda and
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their agenda they can cooperate on. i think paul ryan is very hopeful in particular on tax reform, tax cuts, and donald trump wants help on immigration. and we will see how they end up. they had a smooth meeting today. they had lunch at the capitol hill club, a republican gathering spot in washington d adjacent to the national committee. not a lot of substance emerged but cordiality was the rule. >> how big a figure will mr. pence be in working with congress? >> reporter: i think a very significant one. one of the things about donald trump is that he has not served if government before. mike pence has, in particular on capitol hill before becoming a governor. i think he's going to exploit his advertities with house repu to try to mend the relationship that at times has been strained. >> thanks very much, john harwood. next, mouse trapped.
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what's dragging down mickey, mini and the crew. the dow component of widely-held stock disney missing expectations in its late errs quarter, earning $1.10 a share, a full six cents below estimates. that was below a year ago, and wall street wanted $13.5 billion. shares initially fell after hours following the news but then reversed course. julia boorstin tells us what is hampering disney. >> reporter: media giant disney reported a mayor miss of analysts' expectations of earnings.
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the company said it was attributed to an extra week in the prior ar, skewing this year's numbers, with the biggest impact on the company's cable network business. that division and espn in particular were in focus in light of growing concerns about the health of the tv bundle. cable network revenue's dropped 7% in the quarter and operating income dropped 13%. lower advertising in affiliate revenue and higher programming and production costs due to lower ratings and declining subscribers. it's set to be a hot topic for bob iger and disney for years to come. julia boorstin in burbank, california. metlife launches its largest share buyback ever. the nation's largest life insurer said its board approved a buyback program. last year they suspended
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buybacks to spin off a unit. shares today up nearly 5% at 53.74. conocophillips said it will sell 5 to $8 billion worth of assets and cut its capital budget by 4% next year. the energy giant said moves like this will help it to become profitable when brent oil prices are at $50 a barrel. the company launched a $3 billion share buyback. shares were down nevertheless, 2%, 44.78. shares of fitbit rallied today following unconfirmed reports after a takeover offer. china-based abm capital proposed to buy the company for $12.50 a share. fitbit denies receiving any communication or a bid from any firm. fitbit shares nevertheless up 3% at $8.86. a robust back to school shopping season lifted profit and sales of kohl's, which
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increased its share repurchase plan to $2 billion. shares popped 11.5% at $505$50.. what does big business think about a trump administration? today in "new york times"' deal book conference, some of the nation's top executives weighed in. >> we should congratulate the next president of the united states. it's a significant achievement. think about, most people did not expect this outcome. it's a pretty amazing story. >> of all the possible outcomes that could have happened in the election, this one wasn't even on the sheet. and every time somebody brings up and said, what if the republicans sweep? get out of the room, that's not even -- so we started with a fresh piece of paper yesterday, we had no idea how to approach it. >> of course i imagined he could win.
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i did not think it was a high probability. >> our country has to have more respect for one another. we have to unite. and i saw some very positive signs of that yesterday with our current president, hillary clinton's comments publicly, and others coming together and saying, we have to get together, we have to unite, we have to address some of the issues and work together. president-elect trump is our president. so let's get behind him. >> how much money might donald trump's proposed tax plan save you? find out next.
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trump has proposed one of the biggest tax cuts for the wealthy in history while giving smaller breaks to the middle class. here's how much money trump's plan would put in people's pockets. >> reporter: donald trump's tax plan would put an average of $2900 a year back into the pockets of average american taxpayers. the highest earners get the biggest cuts both in dollar and percentage terms. trump has touted his plan as a way to simplify the tax code and put more spending into the private sector. so the biggest change he's proposing is to cut the seven current tax rates down to three. it would be 12%, 25%, and 33%. companies get a big cut too. the corporate tax rate going from 35 to 15%. for those who own their own companies or have partnerships, trump would allow them to use that 15% rate for their personal income tax returns. he would also eliminate the estate tax which currently applies to estates worth more than $10 million.
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and he would cut the capital gains tax. so what does it all mean in dollar terms? well, if you add in all those tax provisions together, the bottom quintile earns get $110 or less than 1% of their income. middle earners get about a thousand bucks. the top 1% get a cut of 13.5% or $214,000 a year. and the top .1% get a cut of more than 14%, giving them an extra $1,066,000 per year. trump's plan is similar to that put forth by house speaker paul ryan, so it has a good chance of becoming law. all that extra cash could go to consumer spending or saving. the tax policy center says trump's plan would add $6 trillion to the deficit over the next ten years. for "nightly business report," i'm robert frank.
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finally, susan li looks at taxing your sugar intake. >> reporter: the pop and fizz of soda may be getting more expensive. chicago and its surrounding suburbs in cook county, the county's board is proposing a penny an ounce tax on cola, sports drinks, iced tea and energy drinks, and for the first time, diet sodas. if approved it would be the latest to join six other cities across america that have approved these so-called soda taxes. four of those cities voting in the levy this week, including in san francisco. >> it's one way to decrease consumption of something that in the end costs a lot more than that tax. diabetes is really expensive. >> i don't think we need to tax things we feel are unhealthy. i think people should have the
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ability to make those types of choices. >> reporter: but the soda tax has really worked. one example might be mexico, which introduced its soda tax nationwide in 2014. a research study published by medical journal "bmj," found that reductions in consumption why higher in lower income houses. the cost of the drinks will increase by 20%. the cook county coalition against beverage taxes says, "we remain very concerned that a bench tax will directly affect working families and small businesses. if this tax passes, consumers will pay more and get less freedom." meantime the world's largest drink makers say soda levies are not about nutrition at all. >> it's got nothing to do with
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public health issues. across the jurisdictions, everybody had a budget problem. when you see taxes coming in, it's because of budget issues. >> reporter: beverage makers are changing the recipes to slash the calorie count. at least two-thirds of pepsico's benches will contain 100 calories or less for a 12-ounce serving in a decade. the cook county vote will be the biggest test yet. if the ballot gets approved, it would add another city on a growing list of places across america that wants to tax your consumption choices. for "nightly business report," i'm susan li. >> thanks for watching, everybody. see you back here tomorrow night.
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[theme music playing] narrator: this year, judges mary berry and paul hollywood couldn't have asked for more. paul: the bakers have been unbelievable. i mean, after last year, i thought, "it can never get any better." but i was proved wrong again. narrator: they displayed exceptional talent as they strove for excellence. mary: really lovely. very good. we've had very difficult challenges this year, and so timing has been so important. narrator: and at times, they almost snapped under the pressure... aah! my mind's gone blank. that was stressful. it's not hot enough. i'd sooner have another baby. narrator: but ultimately produced bakes of outstanding quality. mary: queen victoria would be proud.
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